Quality-Volume Divide

Understanding The Challenge of Capturing High Quality and High Volume

Ask almost any advertiser who has at least a modicum of experience in
online advertising, and growing volume while maintaining quality will
rank high among their challenges and frustrations. It is a problem old as time in the performance marketing sector, and the unfortunate truth is that after a certain point, quality starts to degrade. Let's use an auto
insurance offer running on a cpa network in order to better illustrate the challenge. The offer looks
to get users to enter their information to see if they could lower
their auto insurance payments. When a user enters their information,
the network receives credit and they then credit the appropriate
publisher. The person buying the lead receives no money from the user
filling out the form only from the percentage of users who then go on
to purchase a policy. The higher that conversion rate from lead to policy, the higher the
quality, with quality as defined here and price the buyer can be being highly correlated. If more people convert from lead to policy, the lead buyer can
afford to pay more. If fewer people do, then they will have to lower
the payout in order to continue covering the cost of buying the leads.

In the optimal scenario, conversion rates start out profitably and even
increase over time as both sides optimize. At a point, though,
especially in the optimal scenario where the advertiser sees good
returns with good volume, they will want more. Two things start to
happen at that point. The first is often counterintuitive for the advertiser,
and I called it the price fallacy in lead generation,
namely that more volume comes at a higher price per lead. What the price fallacy
fails to capture, tough, is what more often than not happens to quality. Almost invariably, once buyers and sellers work on capturing incremental leads, they
end up succeeding but at the expense of the initial quality. Here's an illustration of what happens:

As the above shows, the optimal phase sees volume growing
with quality remaining above the break even for the lead buyer (where break even is an internally designated metric representing an acceptable spread between the desired cost per transaction and the actual cost per transaction). When the two parties switch
into the forced growth phase, volume continues to increase (often at a slope higher than the initial growth), but quality
starts to slip. More quickly than either expect it goes from the advertiser
having a positive yield to a negative one.

Quite a few
explanations exist for the quality-volume divide. One of the more
straight forward revolves around intent. Only so many people have a
given interest in a product. B2B marketers deal with this issue all the
time. For some high dollar, super complex sales, e.g., a multi-million
dollar database configuration, there just aren't that many people who
could be buyers. With auto insurance, the number is fortunately much
higher, but it's not infinite. Different traffic channels have
different levels of intent - search is not surprisingly higher than
co-registration. But for many verticals, there are only so many keywords
available. To get in front of more users it means trying other avenues
- longer tail terms, coreg, email, display, contextual ads, etc. Each one of those will have its
equivalent of head users and tail users - sites / placements where
users who click will have an interest as opposed to someone who places
an ad on facebook saying, "Find out how much it is to insure a
Ferrari." Each incremental step works in obtaining more traffic, but without without additional technology / processes comes at the expense of the intent of the person who views / clicks /
converts on the ad. Here is what it looks like plotted.

Saturation too plays a role. At some point, an advertiser will simply
have reached the vast majority of potential users for the product. That of course doesn't stop them from still wanting to grow. They don't want to settle for the
same amount, and it pushes them to continuing trying even at the
detriment of their quality. It's not that higher volume and good
quality can't go together. It's all about the incremental lead in the
growth phase. In the forced growth phase, instead of the next lead
converting at or near the previous lead, it keeps slipping. Good leads
still exist, but they get lost among the lower quality ones. It's a
problem, if solved, will mean incredible gains, but it currently falls
outside the skill set of both the lead buyer and lead seller. Each can
get better - they can implement various levels of verification
(quality, scoring, call centers), but to get really good means each
getting away from what they do best. Buyers and sellers get closer, but
they will never close the divide fully. It's too complex, too
distracting, and not urgent enough for them. All of which means one of
two things will happen. The divide will come and bite everyone in the
behind and/or someone else will come along, solve it, and do very well.
A note of warning though, there is another reason why no one has done
so to date. It's anything but easy.